Fitch Affirms Lincoln National Corp. On Planned Capital Initiatives

CHICAGO--(Business Wire)--
Following the company's announcement yesterday of an asset sale and several
capital raising initiatives over the next several weeks, Fitch Ratings has
affirmed the ratings of Lincoln National Corp. (LNC) and its operating
subsidiaries. Fitch also has assigned a 'BBB' rating to the company's proposed
issuance of up to $500 million in new senior unsecured notes. The Rating Outlook
remains Negative. A full list of ratings follows at the end of this release.

The capital raising initiatives include the issuance of $600 million in new
common equity, up to $500 million in new senior unsecured debt, and
approximately $950 million in new preferred stock issued under the U.S.
Treasury's Capital Purchase Program (CPP). While LNC continues to face
considerable challenges, primarily related to the impact capital market turmoil
has had on the company's capital position and operating performance, Fitch takes
a positive view on initiatives management has taken thus far to bolster capital
and adjust to the current uncertain operating environment.

In addition, LNC announced yesterday that it has signed a definitive agreement
to sell its Gloucester, England-based life insurance and retirement product
operations (Lincoln UK) to SLF of Canada UK Limited, a subsidiary of Sun Life
Assurance Company of Canada, for expected net proceeds of between $280 million
and $300 million. Assuming regulatory approval, the transaction is expected to
close near Sept. 30, 2009. Currently, LNC does not carry any goodwill associated
with its UK operations on its balance sheet. However, the company is expected to
record a GAAP loss on the transaction of between $170 million and $190 million.

Fitch believes that CPP eligibility enhances near-term financial flexibility in
a period of challenging capital markets access, and could ultimately help
stabilize ratings. While Fitch believes that LNC will buttress capital through
its use of CPP and other recently announced initiatives, Fitch expects the
effect of the ongoing recession and capital market turmoil to continue to
pressure LNC and its peers, and the company's ratings are being affirmed at
their current levels to reflect these ongoing risks.

Fitch downgraded LNC's deferrable capital securities to 'BB+' on April 16, 2009,
reflecting an increasing likelihood that LNC would trigger the alternative
coupon satisfaction mechanism (ACSM) associated with these securities due in
part to a goodwill write-down the company was expected to record in the first
quarter of 2009. Assuming LNC is successful in its recently announced capital
raising initiatives, the potential for triggering the ACSM will become
significantly more remote. However, Fitch believes the receipt of deferrable
government capital increases the risk of deferral for all deferrable securities
in LNC's capital structure. Therefore, Fitch is maintaining the additional
notching between LNC's senior unsecured debt and hybrid securities to reflect
this risk.

The Negative Outlook on the LNC's ratings reflects Fitch's view that near-term
adverse financial market and recessionary economic conditions will likely
continue for an extended period. As a result, Fitch believes LNC could
experience higher-than-expected volatility in financial results and capital.

Fitch's ratings on LNC are supported by the company's longstanding strong
competitive position in the life insurance and annuity market, strong and
diverse distribution network, strong management team and historically solid
operating performance. These positives are tempered somewhat by the current weak
economic and capital market conditions, as well as challenges LNC faces with
respect to strong competition in the life insurance and asset accumulation
sectors, particularly in the affluent market segment that LNC has targeted, and
the degree to which the company's earnings continue to be leveraged to the
equity markets.

Lincoln National Corp., headquartered in Radnor, PA, markets a broad range of
insurance and asset accumulation products and financial advisory services
primarily to the affluent market segment. On March 31, 2009, the company
reported consolidated assets of $157.4 billion and common equity of $7.3
billion.

Fitch assigns a rating of 'BBB' to the following issuance with a Negative
Outlook:

--up to $500 million in senior unsecured notes.

Fitch affirms the following ratings:

Lincoln National Corporation

--Issuer Default Rating (IDR) at 'BBB+';

--Short-term IDR at 'F-2';

--Commercial paper at 'F-2';

--Floating-rate senior notes due April 20, 2010 at 'BBB';

--6.2% senior notes due Dec. 15, 2011 at 'BBB';

--5.65% senior notes due Aug. 27, 2012 at 'BBB';

--4.75% senior notes due Jan. 27, 2014, at 'BBB';

--4.75% senior notes due Feb. 15, 2014 at 'BBB';

--7% senior notes due March 15, 2018 at 'BBB';

--6.15% senior notes due April 7, 2036 at 'BBB';

--6.3% senior notes due Oct. 9, 2037 at 'BBB';

--6.75% junior subordinated debentures due April 20, 2066 at 'BB+';

--7% junior subordinated debentures due May 17, 2066 at 'BB+';

--6.05% junior subordinated debentures due April 20, 2067 at 'BB+'.

Lincoln National Capital VI

--Trust preferred securities at 'BB+'.

Lincoln National Life Insurance Company

--Insurer Financial Strength (IFS) at 'A+'.

Lincoln Life & Annuity Company of New York

--IFS at 'A+'.

First Penn-Pacific Life Insurance Company

--IFS at 'A+'.

The Outlook for all the ratings is Negative.

Fitch's rating definitions and the terms of use of such ratings are available on
the agency's public site, www.fitchratings.com. Published ratings, criteria and
methodologies are available from this site, at all times. Fitch's code of
conduct, confidentiality, conflicts of interest, affiliate firewall, compliance
and other relevant policies and procedures are also available from the 'Code of
Conduct' section of this site.

Fitch Ratings, Chicago
Bradley S. Ellis, CFA, 312-368-2089
Julie A. Burke, CPA, CFA, 312-368-3158
or
Media Relations:
Brian Bertsch, 212-908-0549, New York
Email: brian.bertsch@fitchratings.com

Copyright Business Wire 2009